The View | Why good investment advice is only for the rich in the age of financial technology

Two things define you. Your patience when you have nothing and your attitude when you have everything.

And the landscape of wealth management services segregates its ‘have’ and ‘have not’ clients, whether or not they know or like it. Dramatic improvements to, and the popularisation of, information and trading technology may actually favour the power of financial institutions over clients.

The entire experience of what wealth management and private banking services mean is being turned upside down by technology that is providing unprecedented access to data, information and advice. It is already affecting how you make personal investment decisions. It is allowing banks to cull their retail clients, taking and serving the wealthiest, while leaving the least profitable ones to fend for themselves.

Technologists are embracing and promoting financial technology as the next frontier of personal investing with a passion that makes Robespierre seem prudent. Consumers should beware of the pitfalls.

Regulatory changes and new technologies have blown across the financial landscape like an unpredictable weather front. Competition in banking, from payment processing to asset management, have shifted some activities from traditional banks to non-bank institutions. It’s led to the emergence of a new class called “shadow banks”, which includes peer-to-peer lenders for small businesses and consumers and robo-advisors for wealth management. Distinctions between products and services have become blurred.

Then the combination of big data analytics and new and cheap distribution channels via the internet allowed technology start-ups to disrupt traditional banks. Technology acted as an enabler. It lowered barriers to entry so that new institutions could challenge big banks in certain areas. Most of the disruption has occurred in the consumer lending space. But it is also affecting wealth management.

If you don’t have an account starting at about US$1 million, it is unlikely you will benefit from truly interpersonal, high quality investment advice and opportunities.

But, more than ever, due to eight years of catastrophic, near zero savings rates, there’s a huge and eager audience for investment and retirement advice and services - all of them yearning and thirsting for investment yield. Then the internet and social media provides a means of information and distribution that is ridiculously cheap and easy.